Sub-Saharan Africa low domestic revenue mobilization worrisome – IMF
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International Monetary Fund (IMF) Regional Economic Outlook Report on Africa has projected that Sub Saharan Africa economies will grow from 2.8 percent in 2017 to 3.4 percent in 2018 on average, with growth accelerating in about two-thirds of the countries in the region aided by stronger global growth, higher commodity prices, and improved capital market access.
The report, released at the beginning of this month, says the region is set to enjoy a modest growth uptick and that decisive policies are needed to both reduce vulnerabilities and raise medium-term growth prospects. “On current policies, average growth in the region is expected to plateau below 4 percent barely 1 percent in per capita terms over the medium term highlighting the need for deliberate actions to boost growth potential,” reads the report.
According to the Washington based Global Economic Policy think tank, turning the current recovery into sustained strong growth consistent with the achievement of the SDGs would require policies to both reduce vulnerabilities and raise medium-term growth prospects. The report further highlights that prudent fiscal policy was needed to rein in public debt, while monetary policy must be geared toward ensuring low inflation.
According to the organization, the growth pickup has been also driven by a more supportive external environment; while external imbalances have narrowed, the record on fiscal consolidation has been mixed and vulnerabilities are rising as about 40 percent of low-income countries in the region are now assessed as being in debt distress or at high risk of debt distress. Domestic revenue mobilization is one of the most pressing policy challenges facing sub-Saharan African countries.
The IMF says almost all African countries are seeking to raise revenue to make progress toward their sustainable development goals while preserving fiscal sustainability. The IMF also observes that despite substantial progress in the revenue mobilization, sub- Saharan Africa was still one of the regions with the lowest revenue-to-GDP ratio.
Case studies of successful revenue mobilization episodes in the region highlight the importance of medium term revenue strategies to strengthen the basic building blocks of effective tax administration, emphasizing efforts to broaden tax base and mobilizing institutional processes. “Developing new sources of taxation such as property tax and harnessing new technologies that could facilitate access to more reliable information are also important.
Moreover since the revenue mobilization is a process that needs to be successful,” commented Janoslaw Wleczork one of the IMF Africa lead Economic Researchers. Wleczork shares that while the reasons may vary according to country-specific circumstances, there are three aspects of domestic revenue mobilization that make it so important.
The report also underscores that private investment in sub-Saharan Africa is low compared to other countries with similar levels of economic development. “The low level of private investment is constraining the region’s efforts to improve social outcomes by holding back labor productivity and the resulting gains in real wages and households’ income.”
The IMF also emphasizes private investment as a critical factor for the region to achieve sustainable growth and improve social outcomes over the medium term. “While public investment in the region is a similar level to other regions of the world, private investment in sub-Saharan Africa lags well below other regions. As such reforms such as Public –Private Partnerships (PPP), Special Economic Zones (SEZs) and proper mechanism to attract foreign direct investment needed to be given more attention,” underscores the report.
IMF also highlights that PPPs need to be considered carefully in view of the risks, advising that proper management of PPPs requires the adopting of institutional and legal frameworks to asses and limit risks as such projects often entrain contingent liabilities. The IMF also says that while SEZs can, in some cases be successful in attracting investors to the region, they benefit their economies more where they establish strong links with host country firms and become better integrated in the national and regional development strategies.
Business
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.
Business
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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Business
Moody’s Reaffirms African Trade Insurance’s A3 Rating & Revises Outlook to Positive
Moody’s Investors Service (“Moody’s”) has affirmed the A3 insurance financial strength rating (IFSR) of the African Trade Insurance Agency (ATI) for the fifth consecutive year and changed the outlook from stable to positive.
Moody’s noted that the change in outlook to positive reflects the strong growth in ATI’s membership base – that has resulted in improved portfolio diversification, strengthened capital adequacy, and the good profitability despite the challenging operating environment. In addition, ATI benefits from its preferred creditor status (PCS) amongst sovereign member states which protects it from the risk of default by member sovereigns through securing recoveries against claims paid on guarantees.
The strong membership and equity growth are some of the key considerations for the consistent reinstatement of ATI’s A/Stable rating by Standard & Poor’s and Moody’s rating, over the years. Also supporting the rating affirmation are; consistent improvement in financial performance, commitment of its shareholders who continue to uphold the preferred creditor status, its high quality and conservative investment portfolio as well as strong relationships with a number of global reinsurers that provide significant risk-bearing capacity.
With the change in outlook to “positive”, ATI is now better placed to provide enhanced support to its member countries, attract additional shareholding and grow its portfolio. The positive outlook is an indication that if ATI continues to demonstrate its strong underwriting performance and ability to recover claims under the preferred creditor arrangements, among other factors, an upward pressure towards an upgrade may be generated. The Moody’s press release can be accessed from here
Commenting on the rating, Africa Trade Insurance Chief Executive Officer Manuel Moses said: “This positive revision is in line with our 2023 – 2027 strategic objectives in which we set to improve our rating outlook to positive in the first year, and achieve an upgrade of at least “AA”/Stable rating by both Moody’s and S&P within this Strategic Plan period. We aim to achieve this by doubling our exposures and increasing our capital to more than USD1 billion.”
ATI’s mandate is to provide trade-credit and political risk insurance, as well as other risk mitigation products to its member countries and related public and private sector actors. These insurance products not only directly encourage and facilitate foreign direct investment as well as local private sector investment in our member countries, but also contribute to intra- and extra-African trade.
About The African Trade Insurance Agency
ATI was founded in 2001 by African States to cover trade and investment risks of companies doing business in Africa. ATI predominantly provides Political Risk, Credit Insurance and, Surety Insurance. Since inception, ATI has supported US$78 billion worth of investments and trade into Africa. For over a decade, ATI has maintained an ‘A/Stable’ rating for Financial Strength and Counterparty Credit by Standard & Poor’s, and in 2019, ATI obtained an A3/Stable rating from Moody’s, which has now been revised to A3/Positive.